Social transfers and chronic poverty

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24 transfer through particular household members, notably women, to maximise impact. Similarly, studies of Mexico’s Progresa-Oportunidades have reported a rise in investment by beneficiary households, vis-à-vis non-beneficiaries. One study estimates that, on average, 12 percent of income transfers were invested in productive assets. 108 In Namibia, the old age pension is reported to have lifted credit constraints in southern areas of the country. Pensioners seem to be in a better position to access informal credit arrangements from shopkeepers, with regular transfers acting as a guarantee for loan repayment. 109 Similarly, Brazil’s non-contributory pension scheme, Prêvidencia Social Rural, has enabled beneficiaries to access formal credit by showing the magnetic card used to collect their pensions. 110 Whilst providing important insights, the evidence reviewed is not systematic across all social transfers. In some transfer programmes, especially income transfers such as social pensions or human development transfer programmes, access to credit is simply a by-product of the income transfer, and not an explicit objective. The capacity of social transfers to help lift credit constraints is likely to vary across programmes, target groups and environments. These effects are stronger among rural households with deficits in complementary ‘productive’ assets (e.g. inputs, labour), and where credit constraints are directly targeted, as just discussed for the case of Bangladesh. Such integrated approaches to poverty alleviation are expected to maximise the benefits of social transfers through asset protection and enhancing households’ capacity to generate self-employment. All in all, social transfer programmes seem to be effective in protecting and promoting asset accumulation among poor and chronically poor people. However, the impact assessment literature on this is limited to a few programmes and is not systematic across the board. Amongst human development programmes and social pension schemes, lifting credit market constraints is simply a by-product of the income component, and not an explicit programme objective. Some integrated poverty reduction programmes aim as a central mission to facilitate asset accumulation through direct income and asset transfers and credit accessibility. The capacity of social transfers in lifting credit constraints is therefore likely to vary across programmes, target groups and socio-economic environments. Evidence suggest that these effects are stronger among the rural poor who are severely deprived in terms of productive assets (e.g. inputs, labour), and where credit accessibility is directly targeted. Programmes that target asset accumulation tend to be focused on moderately poor households, and only a handful of programmes, notably Bangladesh’s Targeting the Ultra Poor programme, have managed to reach out to the chronically poor. The issue of how to strengthen asset protection and asset promotion amongst the chronically poor requires an integrated approach to policy that includes social transfers in combination with saving and credit accessibility. This is an area currently being researched, especially as many social transfer programmes are maturing.
5 Conclusions and policy implications This report has discussed the extent to which social assistance programmes emerging in developing countries address chronic poverty. Three key policy questions have been addressed: first, do programme objectives tackle chronic poverty? Second, are programme design features – for example, the selection of beneficiaries, delivery mechanisms and complementary interventions – effective in addressing persistent deprivation? Third, do social transfer programmes benefit chronically poor people? Section 2 explored the extent to which programme objectives provide clues about their potential to tackle chronic poverty. Programmes that aim to improve the productive capacity of households in poverty are more likely to tackle chronic poverty. Section 2.1 examined transfer programmes that aim to improve the productive capacity of households though human capital investment, whereas Section 2.2 discussed the role of transfer programmes in facilitating asset protection and asset accumulation. These two approaches throw light upon different ways social transfers can support poor households’ efforts to overcome chronic poverty. With regard to human capital investment, the overall findings lead to the following conclusions: • The balance between programme goals, notably reducing current poverty and addressing the causes of persistent deprivation, varies across programmes, with human development programmes in Latin America especially having a direct mission to tackle the intergenerational transmission mechanisms of chronic poverty. • In other contexts, social transfers seem to facilitate human capital investment as a by-product of their income component, as they relax budget constraints, which allow households to increase the quantity and quality of their food intake. • The complementarities between nutrition, health and education, and the spillover effects and positive externalities emerging in labour, commodities and credit markets from the strengthening of these dimensions of well being, are paramount for understanding the expansion, in terms of scale and global coverage, of social transfers with a human development focus. With regard to the role of social transfers in facilitating asset protection and asset accumulation, the report finds that: • In the absence of insurance markets, and under situations of uncertainty, poor households will resort to coping strategies that can lower their productive and earning capacity and, in extreme situations, lead to a vicious circle of poverty. Social transfers can act in that context as ex ante protective mechanisms which prevent households from taking actions that diminish their productive capacity. • Fewer programmes have taken a ‘promotive’ approach to support households building and/or rebuilding their physical assets. This is done by linking income transfers with asset transfers and credit accessibility. The principles underpinning these policies rely on the connection between credit market imperfections and sub-optimal levels of capital investment. However, the cost-effectiveness of this type of policy in terms of tackling chronic poverty remains unclear. • Most programmes seem to relax credit constraints as a by-product of their income component, and not as a result of an explicit design feature. The length, size and overall package of support appear to play a role in allowing households to make investment decisions. Nonetheless, the existing evidence is
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